Robert C. Scheinfeld
Robert C. Scheinfeld ()

Many patent attorneys, having backgrounds in the hard sciences, can appreciate repeatable tests and bright-line rules. Patent law, however, is rarely clean. The Court of Appeals for the Federal Circuit (CAFC) has illustrated this with a number of split decisions issued over the past few months. The opinions have covered a wide range of patent law—for example, patentable subject matter, obviousness, and damages—and have demonstrated disagreement on the court about how to apply certain tests and even how to interpret the CAFC’s own decisions. This article reports on three recent split decisions, and reviews the competing opinions of the judges.

‘Visual Memory’

In Visual Memory v. Nvidia, No. 2016-2254 (Fed. Cir. Aug. 14, 2017), plaintiff Visual Memory appealed the District Court for the District of Delaware’s decision to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The dismissal was based on a finding that U.S. Patent No. 5,953,740 (the ’740 patent) was directed to patent-ineligible subject matter. The CAFC reversed and remanded, holding that the ’740 patent is directed to an improvement to computer memory systems and not an abstract idea.

The ’740 patent is directed to a computer memory system with “programmable operational characteristics that can be tailored for use with multiple different processors without the accompanying reduction in performance.” This can permit “different types of processors to be installed with the subject memory system without significantly compromising individual performance.”

The district court found that the ’740 patent failed the first step of the Alice test (see Alice Corp. PTY. LTD. v. CLS Bank Intern., 134 S.Ct. 2347 (2014)), stating that the claims were directed to the “‘abstract idea of categorical data storage,’ which humans have practiced for many years.” Under step two, the district court found the claimed computer components were merely generic and found no inventive concept.

In contrast, the CAFC, drawing analogies to the recent Enfish and Thales cases (Enfish v. Microsoft, 822 F.3d 1327 (Fed. Cir. 2016); Thales Visionix v. United States, 850 F.3d 1343 (Fed. Cir. 2017)), found that the claims of the ’740 patent are directed to patent-eligible subject matter because the claims are directed to a technological improvement. Specifically, the claims are directed to “an improved computer memory system, not the abstract idea of categorical data storage.” The court further noted that the specification of the ’740 patent provides specific advantages offered by the memory system.

Judge Todd Hughes argued in dissent that the claims are directed to “categorical data storage” because the claims and specification allegedly do not provide specifics regarding implementing the programmable operational characteristics. Judge Hughes noted “under the majority’s reasoning, many patent ineligible computer-implemented inventions could be described as non-abstract because they purport to ‘improve’ a computer despite requiring someone else to provide all the innovation.”

The majority countered that a microfiche appendix to the patent, which included 263 frames of computer code, must be assumed to provide enablement during review under Rule 12(b)(6). Furthermore, enablement is a 35 U.S.C. §112 issue, rather than a §101 issue. Finally, the majority argued that the innovative feature of the patent was the creation of a memory system which works more efficiently, rather than the programming required to configure the memory system.

Section 101 continues to be challenging, with many patentees and patent examiners addressing it daily. The split decision in Visual Memory confirms once more that the CAFC struggles to identify what is or is not patent-eligible subject matter under Alice.

‘Intercontinental Great Brands’

On Sept. 7, 2017, the CAFC in Intercontinental Great Brands v. Kellogg North America, No. 2015-2082, -2084 (Fed. Cir. Sept. 7, 2017), affirmed the District Court for the Northern District of Illinois’ summary judgment for defendant Kellogg holding U.S. Patent No. 6,918,532 (the ’532 patent) is invalid for obviousness. The court also affirmed summary judgment rejecting inequitable conduct by patentee Kraft (now called Intercontinental). Judge Jimmie Reyna dissented from the obviousness portion of the decision, taking issue with the weight given to objective indicia of non-obviousness.

The ’532 patent is directed to a container for food products (e.g., cookies) that includes a rigid frame that can act as a tray for the food and a recloseable wrapper. The specification of the ’532 patent acknowledges that these two features are drawn from known containers: the tray from known cookie containers and the recloseable wrapper from known wet-wipe containers.

The district court relied on two references for disclosing each of the features: first, an article that disclosed a tray for sushi wrapped in a resealable container, which the court found to have each feature of the ’532 patent except the rigid frame; and second, known cookie packaging frames. The court also considered objective indicia including evidence of commercial success, industry praise, and copying, which the court recognized was “substantial.” However, the district court ultimately found “the primary considerations lead to a conclusion that the invention was obvious in light of the prior art, and [Intercontinental's] strong showing of secondary considerations does not outweigh this determination.”

The CAFC was not persuaded by Kraft’s arguments that the district court did not provide enough weight to the objective indicia or that the district court drew an ultimate conclusion on obviousness before considering the objective indicia.

In dissent, Judge Reyna wrote extensively on the importance and history of objective indicia, including the judge’s preference for the term “objective indicia” over the term “secondary considerations” to “prevent any misperception that they are less important than, i.e., secondary to, other non-obviousness factors relevant to determining whether a claimed invention would have been obvious.” Judge Reyna also argued that objective indicia—typically listed as the fourth and final Graham factor (see Graham v. John Deere, 383 U.S. 1 (1966))—should not always be considered last during obviousness analysis. Ultimately Judge Reyna argued if the “substantial” evidence of objective indicia did not overcome a showing of obviousness in this case, “it is hard to imagine a situation in which it would.”

Both the majority and dissent seemed to agree that the prior art presented a strong case for obviousness, and that the objective indicia of non-obviousness was compelling. The disagreement came down to the weight that should be applied to the objective indicia, with members of the CAFC disagreeing on how to apply the facts to the Graham factors.

‘Mentor Graphics’

In Mentor Graphics v. Eve-USA, No. 2015-1470, -1554, -1556 (Fed. Cir. Sept. 1, 2017) (Mentor II), a split CAFC denied a request for rehearing en banc. At issue in the request was whether the CAFC had properly refused to vacate the District Court for the District of Oregon’s damage award for failing to apportion the lost profits. Mentor Graphics v. Eve-USA, 851 F.3d 1275 (Fed. Cir. 2017) (Mentor I).

The technology involved simulation/emulation technology. In Mentor I, the CAFC noted the unusually simple fact pattern: “The relevant market (suppliers of emulators to Intel) contained two parties, Synopsys and Mentor. Mentor sold its own Veloce emulators to Intel and Synopsys sold its ZeBu emulators to Intel which were found to infringe Mentor’s [U.S. Patent No. 6,240,376 ("the '376 patent")] claims.” The district court used the Panduit test (see Panduit v. Stahlin Bros. Fibre Works, 575 F.2d 1152 (6th Cir. 1978)) to establish the “but for” cause required for the patentee’s entitlement to lost profits. The CAFC found in Mentor I that the jury properly determined that the Panduit test was satisfied, and that the first two features of the Panduit test could also be applied to apportionment. “In this case, apportionment was properly incorporated into the lost profits analysis and in particular through the Panduit factors.”

The dissent from the denial of rehearing en banc argued that “the panel decision here improperly holds that when lost profits are awarded for patent infringement, there is no requirement for apportionment between patented and unpatented features.” Specifically, “applying the first and second Panduit factors results in the required apportionment.” The dissent argued that instead “but for” cause should be established by the Panduit test, and then apportionment should be separately considered.

Judge Kara Farnandez Stoll disagreed with the dissent, and writing in concurrence with the denial, noted:

In my view the dissent mischaracterizes the panel’s holding in this case, suggesting the panel held that in all cases where lost profits are awarded, apportionment is not required. To the contrary, the panel made clear that apportionment is typically necessary in both reasonable royalty and lost profits analysis. Under the narrow facts of this case, however, the panel determined that because the Panduit factors are satisfied, the damages award properly accounted for apportionment. I do not read the panel’s decision to apply broadly to all lost profits analyses (citations omitted).

In Mentor II, the CAFC disagreed on how Mentor I should be interpreted, with certain members of the court applying a narrow interpretation and other members of the court applying a broad interpretation. The contrasting interpretations will certainly be argued in future cases as litigants consider lost profits and apportionment.

Conclusion

Recent decisions by the CAFC have been split on several matters including still-developing law (patentable subject matter under Alice), settled law (application of the Graham factors in obviousness analysis), and how to interpret opinions from the CAFC itself. Patent law is not a pure science, and recent divisions on the CAFC illustrate a variety of ways learned minds can disagree.

Many patent attorneys, having backgrounds in the hard sciences, can appreciate repeatable tests and bright-line rules. Patent law, however, is rarely clean. The Court of Appeals for the Federal Circuit (CAFC) has illustrated this with a number of split decisions issued over the past few months. The opinions have covered a wide range of patent law—for example, patentable subject matter, obviousness, and damages—and have demonstrated disagreement on the court about how to apply certain tests and even how to interpret the CAFC’s own decisions. This article reports on three recent split decisions, and reviews the competing opinions of the judges.

‘Visual Memory’

In Visual Memory v. Nvidia, No. 2016-2254 (Fed. Cir. Aug. 14, 2017), plaintiff Visual Memory appealed the District Court for the District of Delaware’s decision to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) . The dismissal was based on a finding that U.S. Patent No. 5,953,740 (the ’740 patent) was directed to patent-ineligible subject matter. The CAFC reversed and remanded, holding that the ’740 patent is directed to an improvement to computer memory systems and not an abstract idea.

The ’740 patent is directed to a computer memory system with “programmable operational characteristics that can be tailored for use with multiple different processors without the accompanying reduction in performance.” This can permit “different types of processors to be installed with the subject memory system without significantly compromising individual performance.”

The district court found that the ’740 patent failed the first step of the Alice test (see Alice Corp. PTY. LTD. v. CLS Bank Intern. , 134 S.Ct. 2347 ( 2014 ) ), stating that the claims were directed to the “‘abstract idea of categorical data storage,’ which humans have practiced for many years.” Under step two, the district court found the claimed computer components were merely generic and found no inventive concept.

In contrast, the CAFC, drawing analogies to the recent Enfish and Thales cases ( Enfish v. Microsoft , 822 F.3d 1327 (Fed. Cir. 2016); Thales Visionix v. United States , 850 F.3d 1343 (Fed. Cir. 2017)), found that the claims of the ’740 patent are directed to patent-eligible subject matter because the claims are directed to a technological improvement. Specifically, the claims are directed to “an improved computer memory system, not the abstract idea of categorical data storage.” The court further noted that the specification of the ’740 patent provides specific advantages offered by the memory system.

Judge Todd Hughes argued in dissent that the claims are directed to “categorical data storage” because the claims and specification allegedly do not provide specifics regarding implementing the programmable operational characteristics. Judge Hughes noted “under the majority’s reasoning, many patent ineligible computer-implemented inventions could be described as non-abstract because they purport to ‘improve’ a computer despite requiring someone else to provide all the innovation.”

The majority countered that a microfiche appendix to the patent, which included 263 frames of computer code, must be assumed to provide enablement during review under Rule 12(b)(6). Furthermore, enablement is a 35 U.S.C. §112 issue, rather than a §101 issue. Finally, the majority argued that the innovative feature of the patent was the creation of a memory system which works more efficiently, rather than the programming required to configure the memory system.

Section 101 continues to be challenging, with many patentees and patent examiners addressing it daily. The split decision in Visual Memory confirms once more that the CAFC struggles to identify what is or is not patent-eligible subject matter under Alice.

‘Intercontinental Great Brands’

On Sept. 7, 2017, the CAFC in Intercontinental Great Brands v. Kellogg North America, No. 2015-2082, -2084 (Fed. Cir. Sept. 7, 2017), affirmed the District Court for the Northern District of Illinois’ summary judgment for defendant Kellogg holding U.S. Patent No. 6,918,532 (the ’532 patent) is invalid for obviousness. The court also affirmed summary judgment rejecting inequitable conduct by patentee Kraft (now called Intercontinental). Judge Jimmie Reyna dissented from the obviousness portion of the decision, taking issue with the weight given to objective indicia of non-obviousness.

The ’532 patent is directed to a container for food products (e.g., cookies) that includes a rigid frame that can act as a tray for the food and a recloseable wrapper. The specification of the ’532 patent acknowledges that these two features are drawn from known containers: the tray from known cookie containers and the recloseable wrapper from known wet-wipe containers.

The district court relied on two references for disclosing each of the features: first, an article that disclosed a tray for sushi wrapped in a resealable container, which the court found to have each feature of the ’532 patent except the rigid frame; and second, known cookie packaging frames. The court also considered objective indicia including evidence of commercial success, industry praise, and copying, which the court recognized was “substantial.” However, the district court ultimately found “the primary considerations lead to a conclusion that the invention was obvious in light of the prior art, and [Intercontinental's] strong showing of secondary considerations does not outweigh this determination.”

The CAFC was not persuaded by Kraft’s arguments that the district court did not provide enough weight to the objective indicia or that the district court drew an ultimate conclusion on obviousness before considering the objective indicia.

In dissent, Judge Reyna wrote extensively on the importance and history of objective indicia, including the judge’s preference for the term “objective indicia” over the term “secondary considerations” to “prevent any misperception that they are less important than, i.e., secondary to, other non-obviousness factors relevant to determining whether a claimed invention would have been obvious.” Judge Reyna also argued that objective indicia—typically listed as the fourth and final Graham factor (see Graham v. John Deere , 383 U.S. 1 ( 1966 ) )—should not always be considered last during obviousness analysis. Ultimately Judge Reyna argued if the “substantial” evidence of objective indicia did not overcome a showing of obviousness in this case, “it is hard to imagine a situation in which it would.”

Both the majority and dissent seemed to agree that the prior art presented a strong case for obviousness, and that the objective indicia of non-obviousness was compelling. The disagreement came down to the weight that should be applied to the objective indicia, with members of the CAFC disagreeing on how to apply the facts to the Graham factors.

‘Mentor Graphics’

In Mentor Graphics v. Eve-USA, No. 2015-1470, -1554, -1556 (Fed. Cir. Sept. 1, 2017) (Mentor II), a split CAFC denied a request for rehearing en banc. At issue in the request was whether the CAFC had properly refused to vacate the District Court for the District of Oregon’s damage award for failing to apportion the lost profits. Mentor Graphics v. Eve-USA , 851 F.3d 1275 (Fed. Cir. 2017) (Mentor I).

The technology involved simulation/emulation technology. In Mentor I, the CAFC noted the unusually simple fact pattern: “The relevant market (suppliers of emulators to Intel) contained two parties, Synopsys and Mentor. Mentor sold its own Veloce emulators to Intel and Synopsys sold its ZeBu emulators to Intel which were found to infringe Mentor’s [U.S. Patent No. 6,240,376 ("the '376 patent")] claims.” The district court used the Panduit test (see Panduit v. Stahlin Bros. Fibre Works , 575 F.2d 1152 ( 6th Cir. 1978 ) ) to establish the “but for” cause required for the patentee’s entitlement to lost profits. The CAFC found in Mentor I that the jury properly determined that the Panduit test was satisfied, and that the first two features of the Panduit test could also be applied to apportionment. “In this case, apportionment was properly incorporated into the lost profits analysis and in particular through the Panduit factors.”

The dissent from the denial of rehearing en banc argued that “the panel decision here improperly holds that when lost profits are awarded for patent infringement, there is no requirement for apportionment between patented and unpatented features.” Specifically, “applying the first and second Panduit factors results in the required apportionment.” The dissent argued that instead “but for” cause should be established by the Panduit test, and then apportionment should be separately considered.

Judge Kara Farnandez Stoll disagreed with the dissent, and writing in concurrence with the denial, noted:

In my view the dissent mischaracterizes the panel’s holding in this case, suggesting the panel held that in all cases where lost profits are awarded, apportionment is not required. To the contrary, the panel made clear that apportionment is typically necessary in both reasonable royalty and lost profits analysis. Under the narrow facts of this case, however, the panel determined that because the Panduit factors are satisfied, the damages award properly accounted for apportionment. I do not read the panel’s decision to apply broadly to all lost profits analyses (citations omitted).

In Mentor II, the CAFC disagreed on how Mentor I should be interpreted, with certain members of the court applying a narrow interpretation and other members of the court applying a broad interpretation. The contrasting interpretations will certainly be argued in future cases as litigants consider lost profits and apportionment.

Conclusion

Recent decisions by the CAFC have been split on several matters including still-developing law (patentable subject matter under Alice), settled law (application of the Graham factors in obviousness analysis), and how to interpret opinions from the CAFC itself. Patent law is not a pure science, and recent divisions on the CAFC illustrate a variety of ways learned minds can disagree.